Pound South African Rand (GBP/ZAR) Exchange Rate Tumbles as Commodities Rally

(Updated 16:30 08/04/22)

The Pound South African Rand (GBP/ZAR) exchange rate continued to fall today. A strong US Dollar (USD) harmed the Pound’s (GBP) chances today. Commodity prices hit fresh highs as the day went on which pushed the South African Rand (ZAR) higher.

At time of writing the GBP/ZAR exchange rate is at around R19.0948, which is down roughly -0.8% down from this morning’s opening figures.

Pound South African Rand (GBP/ZAR) Exchange Rate Dips as Ukraine-Russia Conflict Intensifies

The Pound South African Rand (GBP/ZAR) exchange rate is dipping lower today. Retreating risk appetite is likely harming the Pound’s (GBP) chances today, as well as a softened outlook from the Bank of England (BoE). The South African Rand (ZAR) meanwhile may well be benefitting from a further rally to commodity prices.

Pound (GBP) Drops amid Softened BoE Outlook

The Pound (GBP) is falling against many of its rivals today. A fragile risk appetite is likely weighing upon Sterling today in the face of the Ukraine-Russia conflict. The Bank of England’s (BoE) continued dovish stance could also be keeping GBP suppressed today, as well as reports of soaring prices in the UK.

Prospects of a peaceful resolution to the war in Ukraine have continued to ebb in recent days. Ukrainian forces are preparing for a fresh Russian offensive in the country’s Donbas region after forces withdrew from the city of Kyiv.

Additionally, the city of Mariupol remains under siege from Russian forces as mayor Vadym Boichenko reported that more than 100,000 civilians still needed to be evacuated. Kremlin spokesperson Dmitry Peskov said that Russian forces were hoping to take the city soon.

A softened tone from the BoE compared to other central banks is may also be keeping pressure on the Pound today. BoE policymakers have continued to echo a dovish tone in recent weeks. Deputy Governor Jon Cunliffe stated on Monday that he felt sustained rate hikes may not be needed despite record-high inflation.

Finally, an ongoing rise to household goods’ prices could be denting confidence in the Pound. The news comes amid a cost of living crisis in the UK that experts say could drive millions into poverty. The Co-op group has warned that continuing supply issues and inflation could force them to raise prices sharply.

South African Rand (ZAR) Gains amid Falling Covid-19 Case Numbers

The South African Rand (ZAR) is rising against its competitors today as commodity prices continue to rally. The easing of Covid-19 restrictions in the country may also be helping to bolster the currency.

Commodity prices have continued to climb in the face of the war in Ukraine. Prices have continued to surge following the first days of the invasion as a strong post-pandemic demand and reduced supplies affect the markets.

Analysts at investment banking company JPMorgan highlighted the potential for commodities to see another 30% to 40% upside from current positions.

ZAR may also be continuing to benefit from renewed confidence after the country brought its state of national disaster to an end on Monday. The legislation had originally been introduced two years ago in order to help combat the Covid-19 pandemic. Businesses and legislators welcomed the move as Covid-19 cases across the country continued to show a steady decline.

GBP/ZAR Exchange Rate Forecast: Will BoE Commit to Rate Hike if Inflation Climbs Higher?

Looking to the coming week for the Pound (GBP), a forecast drop in GDP figures on Monday could pull the currency lower. Employment figures on Tuesday could help limit any potential losses however. February’s unemployment rate is expected to remain unchanged which may increase expectations of a BoE rate hike.

A further rise to UK inflation on Wednesday could also push the currency higher off the back of BoE rate hike expectations.

For the South African Rand, a forecast drop to February’s retail sales could pull the currency lower on Wednesday. Other than that, further fluctuations in commodity prices could prompt movement in ZAR.

Gareth Monk

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